Iran To Sue Turkish Broker Over $263M Electricity Debt

Dalga Khatinoglu
Dalga Khatinoglu

Oil, gas and Iran economic analyst

A technician works on an electrical line in the aftermath of a deadly earthquake in Kahramanmaras, Turkey, February 8, 2023.
A technician works on an electrical line in the aftermath of a deadly earthquake in Kahramanmaras, Turkey, February 8, 2023.

Iran is preparing to sue a sanctioned Turkish businessman and broker over a dispute involving $263 million in debts related to electricity imports.

The complaint against CEO Sitki Ayan and Gent Electricity Energy stems from the company's decade-long failure to settle debts related to Iranian electricity imports, according to Tavanir, the Foreign Trade Office of Iran's state electricity company.

Ayan, a friend of Turkish President Recep Tayyip Erdoğan, previously brokered sales for the Islamic Revolutionary Guard Corps’ Quds Force. This activity led to him and the Gent company being placed on the US Treasury’s sanction list.

The US Treasury states that Ayan used his extensive business network to facilitate and conceal the sale and shipment of Iranian oil on behalf of the IRGC-QF.

The statement, published on December 8, 2022, added that Ayan had established business contracts to sell Iranian oil worth hundreds of millions of dollars to buyers in China, East Asia, the United Arab Emirates, and Europe. He also helped arrange the transportation of Iranian oil and funneled the proceeds of these sales back to the IRGC-QF.

The Turkish private company signed a contract with Iran's Energy Ministry in 2009 to import electricity. Turkey ceased importing Iranian electricity in 2017, but the reasons for Iran's delay in suing Ayan and his company remain unclear.

From 2009 to 2017, Iran exported 11.5 terawatt-hours (TWh) of electricity to Turkey, although the specific share imported by Gent Electricity Energy company is not known.

Despite all measures taken, including negotiations between Tavanir and the Turkish private company, as well as diplomatic efforts through various channels, the debts remain unpaid, according to Tavanir director Mehrdad Eglimi.

Iran will now refer the case to the Swiss Chambers' Arbitration Institution, Eglimi said.

Electricity exchange plan

Meanwhile, the Turkish Minister of Energy and Natural Resources, Alparslan Bayraktar, visited Iran earlier this month, and the sides agreed to initiate an electricity exchange in the coming months.

Turkey is set to deliver electricity during Iran's peak consumption period in the summer and receive Iranian electricity during other seasons.

Currently, Iran imports electricity from Armenia, Azerbaijan, and Turkmenistan and exports to Afghanistan, Pakistan, and Iraq. Iran was a net electricity exporter until early 2023, but its power trade balance has now reached zero due to a worsening domestic electricity shortage.

Until the mid-2010s, Iran was exporting 12 TWh of electricity and importing 4 TWh annually. In recent years, its net export volume has decreased significantly due to delays in developing new power plants and rapid domestic consumption growth.

In 2022, it exported less than 5 TWh (a 13% year-over-year decline) and imported about 3.9 TWh (a 28% increase year-over-year). This means Iran’s net electricity export declined from 8 TWh in the mid-2010s to 1.1 TWh in 2022 and reached zero last year.